China Press Digest: Friday, October 20

     BEIJING (MNI) - The following are highlights from the China press for

Friday, October 20:

     The yuan exchange rate is very likely to continue its two-way fluctuation

and, in general, remain stable, the China Securities Journal reported Friday.

The recent strengthening of the yuan against the dollar after the National Day

and Mid-autumn Festival holiday was due to China's better-than-expected economic

fundamentals, the dollar index's weakening, less central bank intervention,

improved international capital flows, and a reduction of foreign currency demand

domestically due to fewer Chinese citizens traveling overseas, the newspaper

said. Unidentified experts were cited as saying the future status of the dollar

would continue to be the main factor influencing the dollar-yuan exchange rate.

Given the U.S. economy is maintaining modest growth, its tax reform is

advancing, and the shrinking of the Fed balance-sheet has officially started,

the chance for the dollar to dip or rise significantly is small, so the yuan

will not experience a big drop. Strong economic growth, prudential and neutral

monetary policy, a better demand-supply balance of foreign exchange and less

pressure from cross-border capital flows will also contribute to a stable yuan,

the newspaper said. (China Securities Journal)

     China People's Bank of China Governor Zhou Xiaochuan said Thursday at a

discussion by major financial regulators during the Communist Party Congress

that he would retire "soon" from his current position, according to the South

China Morning Post. The newspaper said Jiang Chaoliang, party secretary of Hubei

province and vice-chairman of the China Development Bank, or Guo Shuqing,

chairman of China Bank Regulatory Commission are each seen as the possible

successor. (South China Morning Post)

     The support of the Chinese banking sector is very important to China's

"going abroad" strategy that Chinese President Xi Jinping stressed in his speech

at the opening ceremony of the 19th Communist Party Congress, the Financial

News, a newspaper supervised by the People's Bank of China, reported Friday.

Banks have performed important roles in China's One Belt One Road initiative and

free trade zones, and banks' foreign operations as part of the two programs is

very meaningful for China's economic restructuring, Renmin University

International Monetary Institute researcher Li Hong told the newspaper. Chinese

banks' substantial involvement in the two programs would continue to be their

main development direction, Li said. The report also noted that Chinese banks

have continued to expand overseas as Chinese companies increasingly invest

abroad. Bank branches in foreign countries have increased rapidly, their assets

have jumped and net profits have increased significantly. For example, Bank of

China has invested more than $437.2 billion in 460 programs in countries along

the One Belt One Road initiative. (Financial News)

     Shanghai City Party Secretary Han Zheng said Shanghai is making plans to

establish a "free trade port," as mentioned by Chinese President Xi Jinping in

his opening speech on Wednesday to the 19th Communist Party Congress, the China

Business News reported late Thursday. Han said it's only in a planning stage and

the final proposal needs to be approved by the central government. He also noted

the financial reform and development of Shanghai would come under government

risk control guidelines. (China Business News)

     Chinese local governments have issued CNY3.67 trillion in bonds so far this

year, the China Securities Journal reported Friday, based on data from Wind

Information. As predicted by some financial institutions, full-year local bond

issuance is likely to reach CNY4.8 to CNY4.9 trillion, meaning another CNY1.2

trillion will be issued in the remainder of the year. As the Chinese central

government has taken new measures and issued new policies to control local

government indebtedness, the liquidity of local government debt has increased,

the newspaper said.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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